KLA Stock Tanks: The Real Reasons Behind Today’s Bloodbath

Semiconductor sector gets rattled as KLA shares nosedive—here's what triggered the sell-off.

Earnings Miss or Market Panic?

Wall Street expected another quarter of chip dominance. Instead, KLA's guidance cut sent algorithms into a frenzy.

Supply Chain Ghosts Haunt Again

Whispers of delayed EUV orders surfaced just as ASML reported record backlog. Coincidence? The Street thinks not.

Short Senses Blood in Water

Volume spiked 300% above average as momentum traders piled on. Classic case of hedge funds eating their young.

Another day, another overreaction in tech stocks. Maybe they should've hodl'd like crypto traders.

Image source: Getty Images.

Applied Materials warns on semis

Reporting earnings for its fiscal Q3 last night, Applied Materials said sales grew fine, up 8% year over year, with rising profit margins and earnings per share also up 8%. The problem, however, wasn't what Applied earned in Q3, but what it won't earn in Q4.

Specifically, Applied warned it expects to earn only $2.11 per share in Q4. Adjusted for one-time items, this represents a 15% sequential decline in profit, when Wall Street was looking for an increase. Sales will decline about 8%.

What does this have to do with KLA?

So not great news for Applied Materials, but what does this have to do with KLA, you may ask? And well, here's the thing: Applied blamed "a dynamic macroeconomic and policy environment, which is creating increased uncertainty and lower visibility in the NEAR term" for lowering its Q4 guidance. Applied especially highlighted sales weakness in China, which is said to be still "digesting" all the semiconductor manufacturing equipment it's already bought.

In 2024, Applied did more than 37% of its sales in China, according to data from S&P Global Market Intelligence. KLA did a similar 33% of its sales in China. Logically, therefore, the bad news hurting Applied Materials in Q4 is going to hurt KLA nearly as much. And with KLA stock priced at a sky-high 31 times earnings, the stock has a long way to fall on bad news.

All this means it may be time to start thinking about selling KLA stock.